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Category: Stock Market and Honeywell
Date: 2 May 2020 Stock Price: $137.25 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Honeywell, a Fortune 100 technology company active in various industries including aerospace, manufacturing plants and supply chains. The group's aerospace division has been hit particularly hard due to the Covid-19 pandemic
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About Honeywell
Honeywell (www.honeywell.com) is a Fortune 100 technology company that delivers industry specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials globally. Our technologies help everything from aircraft, buildings, manufacturing plants, supply chains, and workers become more connected to make our world smarter, safer, and more sustainable.
Overview of Honeywell's 1st quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Net sales: $8.463 billion (down from $8.884 billion from the same quarter of the previous year)
- Net sales decreased by -4.7% over the last 12 months
- Costs and expenses: $5.534 billion (down from $5.879 billion for the same quarter of the previous year)
- Costs and expenses decreased by -5.9% over the last 12 months
- Net income: $1.581 billion (up from $1.416 billion for the same quarter of the previous year)
- Diluted earnings per share: $2.21 (up from $1.92 for the same quarter of the previous year)
- PE ratio of Honeywell: 15.6
- Diluted weighted-average shares outstanding: 717 million (down from 737.8 million for the same quarter of the previous year)
- Cash and cash equivalents: $7.721 billion
- Cash and cash equivalents per share: $10.76
- Cash and cash equivalents makes up 7.84% of Honeywell's market capital
- Cash and cash equivalents makes up 12.30% of Honeywell's total assets
- Inventories: $4.584 billion
- Inventories makes up 7.98% of Honeywell's total assets
- Honeywell's inventories increased by 3.6% over the last 12 months
- Accounts receivable: $7.452 billion
- Accounts receivable makes up 12.9% of Honeywell's total assets
- Stockholders equity of Honeywell: $17.865 billion
- Stockholders equity per share in Honeywell: $24.92
- Honeywell is trading at 5.51 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
- For some perspective the average price to book value of a firm in the S&P 500 is 3.34 times. Read more about the S&P500 here
- Cash generated from operations: $939 million
- Cash generated from operations per share: $1.31
Honeywell's management commentary on their 1st quarter 2020 earnings
CHARLOTTE, N.C., May 1, 2020 -- Honeywell (NYSE: HON) today announced strong earnings growth for the first quarter of 2020 despite significant impacts from the COVID-19 pandemic
"Honeywell delivered on our original earnings commitment for the first quarter, with EPS growth of 15% despite the substantial challenges we faced due to the COVID-19 pandemic. We remain focused on the strong operational excellence principles that underlie everything we do, and that discipline enabled us to achieve earnings growth in a challenging first quarter," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "As the COVID-19 pandemic rapidly escalated and the global economy deteriorated, we faced headwinds across our businesses, including rapid changes in our supply chain, constraints at customer sites, and significant impacts on the commercial aerospace and oil and gas end markets. These challenges drove an organic sales decline in the quarter. However, we acted quickly to mitigate the impacts and we continued to serve our customers, including those involved in the COVID-19 response efforts, while ensuring the safety of our employees.”
“The safety of our employees is our top priority,” Adamczyk said. “We have announced that Honeywell will pay for COVID-19 testing costs that are not covered by our employees’ insurance and will pay out-of-pocket treatment costs for those enrolled in the Honeywell medical plan. We have also provided a full year of paid sick time up-front to U.S. non-exempt employees and have announced a $10 million relief fund to help employees that are in financial distress. In addition, Honeywell is playing a critical role in keeping medical professionals safe. We have announced two new manufacturing sites for N95 respiratory masks in the United States. Between these two locations, we will produce 20 million respiratory masks per month and create about 1,000 new jobs. We are also quickly ramping up production of other personal protective equipment, including safety eyewear and face shields. Our medical sensors are widely used in ventilators, and we have significantly increased our sensor production to address demand. In addition, we are shifting manufacturing operations at two facilities to produce and donate hand sanitizer to government agencies. Within the United States, our donation will go to the Federal Emergency Management Agency (FEMA).”
"Honeywell delivered on our original earnings commitment for the first quarter, with EPS growth of 15% despite the substantial challenges we faced due to the COVID-19 pandemic. We remain focused on the strong operational excellence principles that underlie everything we do, and that discipline enabled us to achieve earnings growth in a challenging first quarter," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "As the COVID-19 pandemic rapidly escalated and the global economy deteriorated, we faced headwinds across our businesses, including rapid changes in our supply chain, constraints at customer sites, and significant impacts on the commercial aerospace and oil and gas end markets. These challenges drove an organic sales decline in the quarter. However, we acted quickly to mitigate the impacts and we continued to serve our customers, including those involved in the COVID-19 response efforts, while ensuring the safety of our employees.”
“The safety of our employees is our top priority,” Adamczyk said. “We have announced that Honeywell will pay for COVID-19 testing costs that are not covered by our employees’ insurance and will pay out-of-pocket treatment costs for those enrolled in the Honeywell medical plan. We have also provided a full year of paid sick time up-front to U.S. non-exempt employees and have announced a $10 million relief fund to help employees that are in financial distress. In addition, Honeywell is playing a critical role in keeping medical professionals safe. We have announced two new manufacturing sites for N95 respiratory masks in the United States. Between these two locations, we will produce 20 million respiratory masks per month and create about 1,000 new jobs. We are also quickly ramping up production of other personal protective equipment, including safety eyewear and face shields. Our medical sensors are widely used in ventilators, and we have significantly increased our sensor production to address demand. In addition, we are shifting manufacturing operations at two facilities to produce and donate hand sanitizer to government agencies. Within the United States, our donation will go to the Federal Emergency Management Agency (FEMA).”
Adamczyk continued, “We are well-prepared to manage the downturn with a strong balance sheet and execution rigor focused on cost control and cash generation. We have nearly $9 billion of cash and short-term investments on hand and, in March, we further enhanced our financial flexibility by entering into a $6 billion twoyear term loan and refinanced €1 billion of bonds at attractive rates. Our pension plan remains overfunded, requiring no additional contributions for the foreseeable future.” Adamczyk concluded, “I am proud of Honeywell’s longstanding ability to adapt to and deliver in any type of economic environment, and I am confident in our ability to execute in these uncertain times. Our businesses serve a diverse set of end markets and we continue to invest in innovation for long-term growth, including quantum computing, the Honeywell Forge enterprise performance management software platform, and sustainable nextgeneration products. Honeywell is actively managing through the downturn and is well-positioned for the economic recovery to come.” Due to the evolving nature of the COVID-19 pandemic and related supply chain and market disruptions, Honeywell announced that it has temporarily suspended its full-year financial guidance until the economic impact of COVID-19 stabilizes. The company expects ongoing top-line challenges due to the current market conditions, particularly in the aerospace and oil and gas sectors.
The image below shows Honeywell's expectations for their 2Q 2020 sales
The image below shows Honeywell's expectations for their 2Q 2020 sales
Honeywell (NYSE: HON) stock price history
The image below, obtained from Google, shows the stock price history of Honeywell (NYSE:HON) over the last 5 years. And it's been pretty average time for Honeywell (NYSE:HON) over the last 5 years. 5 years ago the stock was trading at around $100 and its currently trading at $137.25. That's a return of 37.3% provided to Honeywell stockholders over the last 5 years.
The stock of Honeywell is trading at a closer to its 52 week low of $101.08 than it is to its 52 week high of $184.06 which to us its an indication that the short sentiment and momentum of Honeywell is negative at this point in time.
The stock of Honeywell is trading at a closer to its 52 week low of $101.08 than it is to its 52 week high of $184.06 which to us its an indication that the short sentiment and momentum of Honeywell is negative at this point in time.
Recent google searches for Honeywell stock price and HON stock price
The graphic below shows the trend in searches for Honeywell stock price and HON stock price over the last 12 months in the United States as obtained from Google Trends. It shows a significant spike in searches for Honeywell stock price towards the end of March 2020. This coincides with significant decline in their stock price due to global markets sell offs triggered by the coronavirus pandemic and its impact on global economic growth
Recent coverage of Honeywell
The extract below shows recent coverage of Honeywell as obtained from TheStreet.com
Shares of Honeywell International (HON) fell Friday, with better-than-expected earnings offset by a sharp drop in sales amid the coronavirus crisis. The defense contractor and industrial conglomerate also yanked its full-year guidance for 2020. Honeywell's stock price slid 4.06% to $136.07 a share in premarket trading after the corporate giant, whose subsidiaries range from aerospace to building technologies, reported first-quarter earnings per share of $2.21 on net income of $1.53 billion.
That beat the $1.96 a share estimate of analysts surveyed by FactSet, while also ringing in 15% higher than the $1.92 a share, on net income of $1.42 billion, the company reported during the first three months of 2019. However, Honeywell reported a 5% drop in sales to $8.46 billion, falling short of the $8.59 billion estimate of analysts. A range of factors combined to put a dent in Honeywell's first-quarter sales, said Darius Adamczyk, the company's chairman and CEO, in a press statement.
As the impact of the coronavirus epidemic intensified, Honeywell "faced headwinds across businesses, including rapid changes in our supply chain, constraints at customer sites, and significant impacts on the commercial aerospace and oil and gas end markets."
Read the full article here
Shares of Honeywell International (HON) fell Friday, with better-than-expected earnings offset by a sharp drop in sales amid the coronavirus crisis. The defense contractor and industrial conglomerate also yanked its full-year guidance for 2020. Honeywell's stock price slid 4.06% to $136.07 a share in premarket trading after the corporate giant, whose subsidiaries range from aerospace to building technologies, reported first-quarter earnings per share of $2.21 on net income of $1.53 billion.
That beat the $1.96 a share estimate of analysts surveyed by FactSet, while also ringing in 15% higher than the $1.92 a share, on net income of $1.42 billion, the company reported during the first three months of 2019. However, Honeywell reported a 5% drop in sales to $8.46 billion, falling short of the $8.59 billion estimate of analysts. A range of factors combined to put a dent in Honeywell's first-quarter sales, said Darius Adamczyk, the company's chairman and CEO, in a press statement.
As the impact of the coronavirus epidemic intensified, Honeywell "faced headwinds across businesses, including rapid changes in our supply chain, constraints at customer sites, and significant impacts on the commercial aerospace and oil and gas end markets."
Read the full article here
Honeywell (NYSE:HON) latest stock valuation
So based on the 1st quarter 2020 earnings report of Honeywell (NYSE: HON) and their 2Q 2020 sales preview what do we value Honeywell (HON) stock at? Based on their 1st quarter 2020 earnings report our valuation models provide a target price (full value price) for Honeywell stock at $120.70 a stock. We therefore believe the stock of Honeywell is overvalued.
We usually advise investors to look to enter a stock at least 10% below our target price (full value price) which in this case is $1290.70. So a good entry point into Amazon would be around $108.70. We expect the stock price of Honeywell will pull back to levels closer to our target price (full value price) in coming weeks and months.
We usually advise investors to look to enter a stock at least 10% below our target price (full value price) which in this case is $1290.70. So a good entry point into Amazon would be around $108.70. We expect the stock price of Honeywell will pull back to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release of Honeywell
It is expected that Honeywell will release their 2nd quarter 2020 earnings report in late July 2020